nep-ino New Economics Papers
on Innovation
Issue of 2019‒02‒04
thirteen papers chosen by
Uwe Cantner
University of Jena

  1. Predicting innovative firms using web mining and deep learning By Kinne, Jan; Lenz, David
  2. Do Tax Cuts Produce More Einsteins? The Impacts of Financial Incentives vs. Exposure to Innovation on the Supply of Inventors By Alexander M. Bell; Raj Chetty; Xavier Jaravel; Neviana Petkova; John Van Reenen
  3. CONDITIONS FOR INNOVATION IN KIBS: EVIDENCE FROM RUSSIA By Nikolay Chichkanov; Ian Miles; Veronika Belousova
  4. Timing of R&D Decisions and Output Subsidies in a Mixed Duopoly with Spillovers By Lee, Sang-Ho; Muminov, Timur; Chen, Jiaqi
  5. European Innovation Partnerships: How Successful Have They Been in Promoting Innovation in the EU? By Rumen Dobrinsky
  6. The impact of new technologies on the labour market and the social economy By Dachs, Bernhard
  7. Sources and determinants of responsible innovations: occupational health and safety in italian firms By Marialuisa Divella; Alessandro Sterlacchini
  8. The network effects of NGOs on social capital and innovation of smallholder farmers. A case study in Peru By D. Hartmann; A. Arata; M. Bezerra; F.L. Pinheiro
  9. Technology, market structure and the gains from trade By Impullitti, Giammario; Licandro, Omar; Rendhal, Pontus
  10. Boosting social entrepreneurship and social enterprise development in the Netherlands: In-depth policy review By Lou Aisenberg; Stina Heikkilä; Antonella Noya; Filipe Santos
  11. Markets for Financial Innovation By Ana Babus; Kinda Cheryl Hachem
  12. Financialization in the EU and its consequences By Stefano Battiston; Mattia Guerini; Mauro Napoletano; Veronika Stolbova
  13. Prediction Based on Entrepreneurship-Prone Personality Profiles: Sometimes Worse Than the Toss of a Coin By Alexander Konon; Alexander Kritikos

  1. By: Kinne, Jan; Lenz, David
    Abstract: Innovation is considered as a main driver of economic growth. Promoting the development of innovation through STI (science, technology and innovation) policies requires accurate indicators of innovation. Traditional indicators often lack coverage, granularity as well as timeliness and involve high data collection costs, especially when conducted at a large scale. In this paper, we propose a novel approach on how to create firm-level innovation indicators at the scale of millions of firms. We use traditional firm-level innovation indicators from the questionnaire-based Community Innovation Survey (CIS) survey to train an artificial neural network classification model on labelled (innovative/non-innovative) web texts of surveyed firms. Subsequently, we apply this classification model to the web texts of hundreds of thousands of firms in Germany to predict their innovation status. Our results show that this approach produces credible predictions and has the potential to be a valuable and highly cost-efficient addition to the existing set of innovation indicators, especially due to its coverage and regional granularity. The predicted firm-level probabilities can also directly be interpreted as a continuous measure of innovativeness, opening up additional advantages over traditional binary innovation indicators.
    Keywords: Web Mining,Web Scraping,R&D,R&I,STI,Innovation,Indicators,Text Mining,Natural Language Processing,NLP,Deep Learning
    JEL: O30 C81 C83
    Date: 2019
  2. By: Alexander M. Bell; Raj Chetty; Xavier Jaravel; Neviana Petkova; John Van Reenen
    Abstract: Many countries provide financial incentives to spur innovation, ranging from tax incentives to research and development grants. In this paper, we study how such financial incentives affect individuals' decisions to pursue careers in innovation. We first present empirical evidence on inventors' career trajectories and income distributions using de-identified data on 1.2 million inventors from patent records linked to tax records in the U.S. We find that the private returns to innovation are extremely skewed – with the top 1% of inventors collecting more than 22% of total inventors' income – and are highly correlated with their social impact, as measured by citations. Inventors tend to have their most impactful innovations around age 40 and their incomes rise rapidly just before they have high-impact patents. We then build a stylized model of inventor career choice that matches these facts as well as recent evidence that childhood exposure to innovation plays a critical role in determining whether individuals become inventors. The model predicts that financial incentives, such as top income tax reductions, have limited potential to increase aggregate innovation because they only affect individuals who are exposed to innovation and have no impact on the decisions of star inventors, who matter most for aggregate innovation. Importantly, these results hold regardless of whether the private returns to innovation are known at the time of career choice. In contrast, increasing exposure to innovation (e.g., through mentorship programs) could have substantial impacts on innovation by drawing individuals who produce high-impact inventions into the innovation pipeline. Although we do not present direct evidence supporting these model-based predictions, our results call for a more careful assessment of the impacts of financial incentives and a greater focus on alternative policies to increase the supply of inventors.
    JEL: H0 J0 O3
    Date: 2019–01
  3. By: Nikolay Chichkanov (National Research University Higher School of Economics); Ian Miles (National Research University Higher School of Economics); Veronika Belousova (National Research University Higher School of Economics)
    Abstract: The development of service industries in emerging economies has been attracting more attention in recent years, but to date there have been few studies of knowledge-intensive business services (KIBS) in these countries. (The main exception is the case of a specific sector – software and related Information Technology services, with most focus here being on India. KIBS as a whole have received little examination.) This paper aims to study how conditions for innovation influence innovation activities in KIBS in one of the largest emerging countries, Russia. The study draws on survey data from firms belonging to ten KIBS subsectors, based in major Russian cities in 2015. The results contrast with those generally reported in Western developed economies. In this particular emerging economy, firms experiencing negative market and knowledge conditions are actually more liable to undertake nontechnological innovations. We consider various explanations for this apparent anomaly. The institutional framework appears to be less essential for KIBS than has been earlier documented for manufacturing enterprises in Russia. Implications for innovation management and policy are outlined: both government and corporate, strategies here would benefit from more attention to these sectors
    Keywords: KIBS, conditions for innovation, emerging economies
    JEL: O30 O31
    Date: 2019
  4. By: Lee, Sang-Ho; Muminov, Timur; Chen, Jiaqi
    Abstract: This study considers a mixed duopoly with research spillovers and examines the interplay between firms’ R&D decisions and government’s output subsidies. We investigate and compare the timing of the game between ex-ante R&D and ex-post R&D decisions where the R&D decisions are chosen before the output subsidy is determined in the former case while the order is reversed in the latter case. We show that the equilibrium outcomes can be opposite between the two cases because both public and private firms have different objectives in choosing R&D investments, but the spillovers rate is a key factor that determines their incentives. In particular, we show that the output subsidy is smaller (larger) and the welfare is larger (smaller) under the ex-ante R&D decisions for a higher (lower) degree of spillovers rate. Finally, privatization increases the welfare in both cases only when spillovers rate is weak.
    Keywords: Mixed duopoly; Research spillovers, Ex-ante R&D; Ex-post R&D, Output subsidy
    JEL: H21 L13 L32
    Date: 2019–01–14
  5. By: Rumen Dobrinsky (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: The paper presents an analytical assessment of the implementation of European Innovation Partnerships (EIPs) launched as one of the commitments of the EU Flagship Initiative Innovation Union with the aim to achieve innovative breakthroughs addressing major societal challenges. The EU launched five EIPs to address important societal challenges (1) Active & Healthy Ageing; (2) Water; (3) Agricultural Productivity and Sustainability; (4) Raw Materials; and (5) Smart Cities and Communities. The paper reviews the rationale of introducing the EIPs as a policy intervention aimed at promoting innovation in the EU and traces the organic evolution and governance structures of the newly emerging formations. It then provides an analytical evaluation of this EU policy initiative based on factual analysis of its implementation experiences and a comparison of its objectives and actual outcomes. In particular, the paper analyses the role of the EIPs as drivers of systemic change in the European innovation ecosystem and catalysts of new innovation activity in Europe. This critical assessment serves as the basis for drawing some conclusions about the strengths and weaknesses of the EIPs as a new policy approach to foster innovation activity in Europe. One central conclusion is that while the EIPs have been very efficient in promoting collaboration among innovation stakeholders they have fallen short of breeding innovation activity of the expected scope and scale. The paper analyses the reasons for this weakness and formulates some recommendations that could serve as possible remedies.
    Keywords: Innovation Union, innovation partnerships, innovation systems and ecosystems, innovation policy, innovation governance
    JEL: O25 O32 O38
    Date: 2019–01
  6. By: Dachs, Bernhard
    Abstract: This study investigates the relationship between innovation, new technologies, employment and inequality. Today, there is an intense discussion on these topics, in particular on the employment effects of new information and communication technologies. Based on the existing literature and experience from previous technological revolutions, the study strikes an optimistic note about the future. It argues that innovation is labour-friendly: it destroys, but also creates employment. In previous times, the race between job creation through product innovation and job destruction through process innovation has been won by the job-creating effects of innovation. As a result, the author does not expect that digitalisation will lead to mass unemployment. However, in his view, the costs of digitalisation are unevenly distributed due to the skill-biased nature of technological change. Low-skilled workers, who face a higher risk of job displacement, are therefore particularly likely to bear much larger costs than others. Another group at risk are those whose occupations involve a high share of routine tasks, which is particularly the case in the service industries. The study concludes that the challenge of the future lies in coping with rising inequality as a result of technological change.
    Keywords: innovation, employment, inequality
    JEL: O33
    Date: 2017–07
  7. By: Marialuisa Divella (Department of Economics and Social Sciences, Universita' Politecnica delle Marche); Alessandro Sterlacchini (Department of Economics and Social Sciences, Universita' Politecnica delle Marche)
    Abstract: This paper provides a micro-econometric analysis of the factors facilitating the introduction of responsible innovations by firms, with a focus on those aimed at improving occupational health and safety. These innovations have been rarely investigated with quantitative methods, especially if compared to those aimed at protecting the environment. Accordingly, we also assess whether firms pursuing health and safety innovations are also those ascribing high importance to the reduction of environmental impacts. The evidence provided by using firm-level data taken from the Italian Community Innovation Surveys highlights the key role played by some external sources of knowledge and internal human resource practices for the achievement of responsible innovations. Many similarities but also important differences between firms emerge, according to whether they are committed to health and safety or environmental innovation.
    Keywords: responsible innovation, occupational health and safety; environment protection.
    JEL: O31 Q55
    Date: 2019–01
  8. By: D. Hartmann; A. Arata; M. Bezerra; F.L. Pinheiro
    Abstract: The impact of Non-Government Organizations (NGOs) on the local development of rural areas has rarely been explored empirically. Here we employ methods from network science to evaluate the impact of an NGO?s activities on the social capital and innovation of three Peruvian farming communities between 2003 and 2018. Data was collected from in-depth interviews with farmers, including information about the farmers? socioeconomic characteristics, types of interactions with the NGO, and innovations in processes, products, marketing, and organization. Our findings show that the NGO had a significant impact on the local social cohesion and innovation performance of the farmers. The NGO helped to connect farmers from different villages, provided access to external knowledge, and facilitated the establishment of a local productive organization. Yet, the NGO also changed the local power structure by becoming the most central agent in the local innovation system. The NGO?s centrality declined, though, at later stages of the development project as local agents took over the role of the NGO. Moreover, econometric results show that having a link with the NGO is associated with a significantly more central role of the farmers in the local network. However, only close cooperation with the NGO, such as membership in the local productive organization or active participation in technical training workshops was associated with a significantly higher innovation performance. Finally, our study demonstrates that methods from network science can help to empirically evaluate and monitor the effects of NGOs on local development at different stages of their development interventions.
    Keywords: NGO, smallholders, innovation, social capital, network analysis, local development
    JEL: D8 L3 O31 Q1 R11
    Date: 2019–01
  9. By: Impullitti, Giammario; Licandro, Omar; Rendhal, Pontus
    Abstract: We study the gains from trade in a new model with oligopolistic competition, firm heterogeneity, and innovation. Lowering trade costs reduces markups on domestic sales but increases markups on export sales, as firms do not pass the entire reduction in trade costs onto foreign consumers. Trade liberalisation can also reduce the number of firms competing in each market, thereby increasing markups on both domestic and export sales. For the majority of exporters, however, the pro- competitive effect prevails and their average markups decline. The incomplete pass-though and the reduction in the number of competitors instead dominate for top-exporters – the top 0.1% of firms – which end up increasing their markup. In a quantitative exercise we find that the aggregate effect of trade-induced markup changes is pro-competitive and accounts for the majority of the welfare gains from trade. Trade-induced changes in competition affect survival on domestic and export markets and firms’ decision to innovate. All exporters, and especially the top exporters, increase their market size after liberalisation which, in turn, encourages them to innovate more. Hence, top exporters contribute negatively to welfare gains by increasing their markups but positively by increasing innovation and productivity. Firms’ innovation response accounts for a small but non-negligible share of the welfare gains while the contribution of selection is U-shaped, being negative for small liberalisations and positive otherwise. A more globalised economy is therefore populated by larger, fewer and more innovative firms, each feature representing an important source of the gains from trade.
    Keywords: gains from trade; heterogeneous firms; oligopoly; innovation; endogenous markups; endogenous market structure
    JEL: F12 F13 O31 O41
    Date: 2018–12
  10. By: Lou Aisenberg; Stina Heikkilä; Antonella Noya; Filipe Santos
    Abstract: This report provides an in-depth analysis of the Dutch policy ecosystem in place for socialentrepreneurship and social enterprises. It identifies the country’s key strengths andchallenges and provides policy recommendations to support the development of a strongerpolicy ecosystem for social entrepreneurship and social enterprises in the country. Keypolicy issues analysed include: clarifying the conceptual framework (Chapter 2); formallyrecognising social enterprises and boosting social entrepreneurship (Chapter 3);promoting social impact measurement and reporting (Chapter 4); developing socialentrepreneurial capacity and skills (Chapter 5); improving access to markets and finance(Chapters 6 and 7); and ensuring sustainable institutional support for socialentrepreneurship and social innovation (Chapter 8).
    Keywords: local development, policy ecosystem, social economy, social enterprises, social entrepreneurship, social impact, social innovation
    JEL: L31 L33
    Date: 2019–01–29
  11. By: Ana Babus; Kinda Cheryl Hachem
    Abstract: We propose a model where both security design and market structure are endogenously determined to explain why standardized securities are frequently traded in decentralized markets. We find that issuers offer debt contracts in thinner markets where investors have a higher price impact, and equity in deeper markets. In turn, investors accept to trade in thinner markets to elicit less variable securities from issuers if gains from trade are small. Otherwise, investors choose to trade in deeper markets where their price impact is minimized. We also show that there exist equilibrium market structures in which both debt and equity are traded.
    JEL: D86 G23
    Date: 2019–01
  12. By: Stefano Battiston (Centre d'analyse et de mathématique sociale (CNRS/EHESS)); Mattia Guerini (Scuola Superiore Sant'Anna); Mauro Napoletano (Observatoire français des conjonctures économiques); Veronika Stolbova
    Abstract: Building on ISIGrowth research, in this policy brief we present empirical evidence on the patterns of increasing financialization in the EU in the last two decades, an analysis of its possible adverse effects on several objectives of the EU 2030 agenda, including inclusive growth, innovation, inequality and financial stability. We conclude by providing some policy insights and recommendations. The notion of financialization reflects, on the one hand, the engagement of non-financial firms into financial activities not directly related to production, and, on the other hand, the relative size of the financial sector with respect to the overall economy. Several empirical indicators show that financialization has been increasing in the Euro Area in the last two decades. This finding is important because while financialization has been so far mostly considered to be a driver for growth and innovation, there is today a wealth of theoretical arguments and empirical evidence pointing to the detrimental effects of excessive financialization for growth, innovation, inequality and financial stability. First, excessive financialization depresses economic growth because it implies that a larger fraction of credit is directed toward unfruitful investment projects, possibly generating economic crises (e.g. via housing price bubbles). Second, financialization has negative impact on innovation because the separation between actors taking risks from innovation and actors extracting rents from innovation implies lower share of reinvested profits (e.g. via short-termism and share buy-backs). Third, financialization contributes to inequality by strengthening top earners’ bargaining power in terms of higher wages and lower taxation, as well as by burdening public budgets with fiscal assistance to financial institutions in time of crisis. Fourth, financialization may lead to financial instability by increasing both the leverage of interconnected financial institutions and the risk of mispricing of large asset classes (e.g. the dynamics of leverage and mispricing of mortgage backed securities in the run of the 2008 financial crisis). We suggest some countermeasures that could help containing excessive financialization, including: (i) fostering the demand in the real sector; (ii) establishing mission-oriented programs by going beyond the traditional conceptual framework to fix market failures and aim to create markets where they may not exist at all; (iii) encouraging the alignment of top managers’ compensation schemes with long-term profit and corporate social responsible goals; (iv) studying the possibility of setting a minimal ratio on banks for lending to the real economy (to non-real estate sectors); (v) studying the possibility of setting a maximal level of intra-financial leverage for financial institutions.
    Date: 2018–04
  13. By: Alexander Konon; Alexander Kritikos
    Abstract: The human personality predicts a wide range of activities and occupational choices—from musical sophistication to entrepreneurial careers. However, which method should be applied if information on personality traits is used for prediction and advice? In psychological research, group profiles are widely employed. In this contribution, we examine the performance of profiles using the example of career prediction and advice, involving a comparison of average trait scores of successful entrepreneurs with the traits of potential entrepreneurs. Based on a simple theoretical model estimated with SOEP data and analyzed with Monte Carlo methods, we show, for the first time, that the choice of the comparison method matters substantially. We reveal that under certain conditions the performance of average profiles is inferior to the tossing of a coin. Alternative methods, such as directly estimating success probabilities, deliver better performance and are more robust.
    Keywords: Advice, personality, entrepreneurship, profiles
    JEL: C15 D81 L26
    Date: 2018

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